​The Green Organic Dutchman Acquires Premium CBD Company HemPoland for US$15.5 Million, Expands European Reach

Spotlight Companies  |

With online sales of recreational cannabis in Canada less than two months away and upcoming ballots the following month in the U.S. likely to produce more states with legal marijuana, the industry is beginning to accelerate.It’s not just in North America, either, the tailwinds are of global scale.The world’s largest public cannabis companies, all of which call Canada home, are not wasting any time consolidating the industry domestically and abroad in a bid to secure their fair share of the market. Amongst the biggest is The Green Organic Dutchman  (TGOD:CA)  (TGODF), which on Tuesday said that it is acquiring privately-held HemPoland, a move that significantly broadens TGOD’s international footprint and provides deep distribution into Europe.

Go Big or Go Home

HemPoland, which has the mantra “Go big or go home” to describe its genesis on its website, is the first private company in Poland to obtain a state license allowing it to grow and manufacture Cannabis Sativa.The company was founded by Maciej Kowalski, one of Europe’s most well known experts in cannabidiol (CBD), the non-psychotropic component of cannabis and hemp heralded for its therapeutic benefits in treating a wide array of maladies, including epilepsy and pain.To that end, HemPoland has established itself as a leading producer of premium organic CBD oils under the Cannabigold brand, distributed throughout its sprawling network accessing more than 750 million people across 13 countries.

In 2017, HemPoland produced over 32,000 kilograms(~35 tons) of organic dried flower and 310 kilograms (~683 pounds) of organic CBD oils.

With more than 700 points of sale, HemPoland has distribution partners in its homeland, Austria, Netherlands, Germany, United Kingdom, Italy, Switzerland, Portugal, Ireland, Czech Republic, Slovenia, Lithuania, and Estonia.Brick-and-mortar outlets are in addition to a robust e-commerce platform for HemPoland products.

TGOD has established performance-based milestones whereby HemPoland can receive an additional $15.8 million upon successfully reaching $41.1 million in EBITDA by fiscal 2021. Forward 2021 EBITDA’s in the Cannabis sector trade in the range of 6-8x, meaning this acquisition could ultimately lead to as much as $328 million in added market capitalization to TGOD.

TGOD will be welcoming a team of dozens of experts in various fields, such as cultivation, oil extraction and marketing, that comprise the over 60-person HemPoland team.The acquisition also brings TGOD HemPoland’s state-of-the-art oil extraction technology, several commercial-scale extraction units, over 1,250 acres of cultivation capacity (leveraging third parties) and the opportunity for sales and licensing deals in the future across Europe.

The Terms

TGOD, which has raised more than C$350 million to date and has fellow industry giant Aurora Cannabis (ACB:CA) as a strategic partner, is paying US$7.75 million (C$10.2 million) in cash and US$7.75 million (C$10.2 million) in restricted TGOD stock for the acquisition of HemPoland.The stock will be held in escrow for three years from the completion of the transaction.

TGOD has committed to investing an additional US$10.3 million (C$13.5 million) for additional R&D, product and drug development and ongoing global expansion of HemPoland.

The pot has been sweetened (no pun intended) for HemPoland to deliver on what is expected to be an immediately accretive transaction for TGOD. The terms include contingent consideration of up to 3.05 million shares of TGOD, currently worth US$12.0 million (C$15.8 million) based upon delivery of US$32.0 million (C$42.1 million) in earnings before interest, taxes, depreciation and amortization (EBITDA) during fiscal 2021.

Global Leader in Cannabis

In Tuesday’s news release, TGOD chief executive Brian Athaide conveyed that the acquisition is integral to TGOD becoming a global leader in organic cannabis and that more deals are possible.

“HemPoland is a key component to a number of strategic acquisitions and planned partnerships focused on expanding our global distribution network,” he said, adding, “This acquisition will significantly add to the Company’s top and bottom line.Gaining market share with CBD products now, in the EU, with over 700 locations allows TGOD to establish immediate brand awareness across all verticals including infused beverages.”

Kowalski echoed Athaide’s sentiment, saying, “The market and demand for premium organic cannabis and CBD oil is just the beginning, ultimately leading to a variety of higher margin products. Having access to TGOD’s capital, licensing deals, experienced leadership team, and intellectual property will significantly drive momentum for our brand and our company. We are proud to be part of the TGOD family and look forward to becoming the global leaders in organic cannabis.”

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Companies

Symbol Name Price Change % Volume
TGOD:CA The Green Organic Dutchman Holdings Ltd. 8.15 -0.25 -2.98 2,130,222
TGODF Green Organic Dutchman 6.30 -0.17 -2.63 1,385,585

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